tv Nightly Business Report PBS February 9, 2012 7:00pm-7:30pm EST
>> we have reached a landmark settlement with the nation's largest banks that will speed relief to the hardest hit homeowners in some of the most abusive practices of the mortgage industry. >> tom: five of the nation's biggest banks will pay $25 billion for those foreclosure abuses, but with thousands of homeowners still underwater on their loans, is it too little, too late? >> susie: then, painful austerity measures are in the works for the greek people, as politicians there reach a deal to cut greece's debt by billions of dollars and avoid default. it's "nightly business report" for thursday, february 9. this is "nightly business
report" with susie gharib and tom hudson. "nightly business report" is made possible by: captioning sponsored by wpbt >> tom: good evening from the world money show in orlando. two major breakthroughs-- one in u.s. housing, the other on european debt. susie, in europe, finance ministers are reviewing the deal greece reached to dramatically cut its debt. and here in the u.s., the nation's five biggest banks have a $25 billion deal over foreclosure abuses. >> susie: tom, we begin tonight with a look at that mortgage
settlement. it's expected that two million american homeowners could get relief from this. the deal between banks, the federal government, and 49 states lays to rest allegations of improper foreclosures based on so-called "robo-signing"-- the practice of seizing homes without proper paperwork. bank of america, j.p. morgan, wells fargo, citigroup, and ally financial have signed on for the biggest single-industry settlement since cigarette makers cut a deal with the feds in 1998. $20 billion will go toward relief programs for borrowers in trouble. that includes principal reductions, refinancing help, and other plans like principal forbearance for unemployed borrowers. >> tom: susie, the rest-- some $5 billion in fines-- will be split between cash payments for borrowers who were wrongly foreclosed upon, and state and federal governments. president obama called the deal
a "landmark settlement and a step forward for the ailing housing market." >> no compensation, no amount of money, no measure of justice is enough to make it right for a family who's had their piece of the american dream wrongly taken from them. and no action, no matter how meaningful, is going to, by itself, entirely heal the housing market. but this settlement is a start. >> tom: the agreement leaves some housing analysts wondering how much this settlement will actually help real estate. washington bureau chief darren gersh looks beyond the deal's face value, and breaks down how much, or how little, today's foreclosure deal could impact the housing market. >> reporter: when you hear analysts talking about people being "underwater" in their homes, they should be saying "buried in debt" instead. $700 billion is the amount that mortgage debt exceeds the value of all houses that have negative equity. this housing settlement shaves $10 billion to $30 billion off that amount, a tiny slice.
>> so, about 1.5% of the negative equity problem in the united states is addressed by this settlement. it's really a drop in the bucket. >> reporter: while many analysts doubt this settlement will do much, some are more hopeful. economist mark zandi isn't focused on that $700 billion figure. he says what matters is breaking the momentum of distressed sales driving down home prices. and this settlement could help do that if it nudges the number of distressed sales in the right direction. >> once that share is moving south, house prices will stabilize and start to rise, and once house prices start to rise, then those people who are underwater, they've got an incentive, a reason to hold on to their home. >> reporter: another big question around this settlement is who takes the financial hit when a bank cuts the principal on a mortgage. critics say it won't be the banks. >> they have a choice between modifying one of their own loans and modifying a loan that an investor owns, they're going to modify the loan that the investor owns. >> reporter: as you might imagine, the attorneys general who hammered out this deal disagree. >> there are some homeowners
that can't make the full payment, but they can make a part of it. and the part that they make is more than the investor would realize on the foreclosure. so it's in everybody's interest to do that modification. >> reporter: the controversy over who takes the hit is one reason zandi says it's doubtful we'll see widespread mortgage modifications that reduce the amount borrowers owe on their homes. >> it's pretty hard to explain to one homeowner who didn't get the mod... the principal reduction mod why they didn't when their neighbor did. you know, "why not me?" >> reporter: the question of who gets help won't be answered for some time. the banks signing on to the settlement have three years to make good on their commitments. darren gersh, "nightly business report," washington. >> susie: one thing that could help the housing market-- low mortgage rates. for the second week in a row, the 30-year fixed remained at an all-time record low. it's stuck at 3.87%. that compares to 5.05% a year ago. still, even with mortgages enticingly low, getting a loan
these days can be a major headache. suzanne pratt takes a look at one woman's quest for home, sweet home. >> reporter: dr. fernaz safi is happy, having just purchased this two-bedroom condo in cliffside park, new jersey. but her path to property ownership was bumpy. two years ago, she had wanted to buy a different place, but went through hoops when trying to get a loan from a large bank. >> it took about five to six months. finally, they said, no, we really can't get the mortgage. "you'll need this additional information, that additional piece of information. we'll need at least another two to three months." quite honestly, i didn't have that time, so i pretty much pulled out. ( laughs ) >> reporter: after taking a break from her search, safi tried again-- this time, with a smaller bank. >> from the time that i put an offer in to the closing date was 26 days. they approved the mortgage in
nine days. >> reporter: north jersey community bank gave safi that mortgage and a better experience. but she is in the minority. many americans, no matter where they go for a home loan, now find they need a bigger down payment, piles of paperwork, and oodles of patience. to be clear, it's not that smaller banks have looser requirements, but they are, at least in some cases, more nimble. north jersey community bank c.e.o. frank sorrentino says his bank never offered easy money, even during the housing boom. >> since we've been in existence, our credit standards have pretty much been the same. we have this funny policy-- we like to lend money to people who can actually pay us back. >> reporter: the big unknown is what the more stringent loan process will do to the housing market. some say the pendulum has moved too far in the wrong direction, making it too hard for people to borrow, and too difficult for the housing recovery to build a foundation.
>> i think going from so loose policy to so tight policy is not a good thing, and there are people who can actually afford to buy a home and move on. >> reporter: housing expert andrew barroscas disagrees. he says lending standards got too loose and, now, they're just right. >> they are a lot more stringent than where they were, but they're right about at norm of where they should be in order for banks to take the risk. >> reporter: as for safi's new place, she moved in two weeks ago. and already, it's home. >> i love it. i do! >> reporter: suzanne pratt, "nightly business report," englewood cliffs, new jersey. >> tom: stocks barely budged, despite that housing deal and another drop in new claims for jobless benefits. claims fell by 15,000 in the past week to 358,000, further indication that we're seeing an improvement in the labor market.
the dow was up six, the nasdaq added 11, and the s&p rose two. >> susie: more now on that greek deal. greece's political leaders finally agreed today on a package of tough austerity measures. this opens the way for greece to receive $173 billion of badly need bailout funds from its european financial backers. here are the highlights: job cuts for 15,000 government workers; a 20% cut in the minimum wage; and lower pension payments. we're expecting more scenes like these this weekend as the country's labor unions strike to protest the austerity measures. the greek parliament votes on the reforms on sunday. joining us now, scott macdonald, head of economic research at m.c. asset management. >> scott, thanks for joining us tonight. >> thanks for having me. >> all right, so does this agreement mean now that greece gets those emergency funds that it needs so much
and that it also avoids default on its debt. >> what it means is the door is open. the greek government basically the top three parties agreed to make the cut of 1.5% of gdp. they sent it off to brusels where the ministers of the 17 member eurozone countries are meeting, and brusels sent it back to them and said okay, let's see what you can do here. the question now is can the greek government implement this process. and they want to see results at this stage. and that's a very important aspect because they had an earlier bailout plan and they were very, the results is did not come in, this is why we negotiated this package since last july. >> you know, scott there has been so much back and forth it's complicated. its complex. but the bottom line of all this it seems is that these measures are all meant so that greece and that europe can restore economic health and can go back to being a
progrowth growth area. but some people are saying that these harsh measures actually inhibity that from happening. what do you think? >> well, i think it makes it very difficult. last year the greek economy contracted by about 6%, contracted the year before that. growth will not be on the menu this year either. you have got elections coming up in april. you've got ryeouts and demonstrations that have occurred. there is a risk here on the political side where a government comes in in april and says you know what, we signed up for austerity for as long as we can see down the road. we don't know if we want to do this. so there is a lot of risk that sits on the table with this deal. >> so how does this change or maybe not change the whole dynamic of this european debt cries snis. >> well, it changes it from the perspective that you finally have the greek government agreeing to a new deal. that was very difficult to reach, very painful.
the next step here is for them to start implementing it. if they are able to do that, they make the cuts to 15,000 public employees, it begins to move towards a locking the monies that's needed because on march 20th, greece has to redeem a debt of 14.5 billion euros. they don't have the money now. they need this program to work to avoid a messy default as well as to deal with keeping the rest of europe away from contagion issues. >> and also it raises the question what about the whole european economy. many people are worried that europe goes into a recession, given that there is still all this uncertainty about greece, recession or no recession this year for europe. >> i think europe's going have a recession. if you look across-the-board, the italians, the spaniards, the portuguese all have very tough nosed austerity plans. they're not progrowth plan,
not in the short term. the u.k. looks like they could slip into a recession as well. and you're not going to see much growth out of france. that leaves germany maybe with negligible growth. it's not going to be a great year for growth, it's gok a year of austerity and structural adjustment. the big picture is from there, what happens with the impact on the u.s. >> and i think that's an important consideration. i think europe will be a drag factor to the u.s. economy but it won't sink it in that regard. >> okay. we're going to have to leave it there. a lot of question marks. that so much, scott, appreciate it. >> thanks for having me. >> and we've been speaking with scott macdonald, head of economic research at m.c. asset management. >> tom: still ahead-- market watcher harry dent joins us live from the world money show in orlando. get ready for it-- he sees a great crash ahead. >> susie: they helped drive ford motor's remarkable turnaround; now, they're stepping down.
chief financial officer lewis booth and product development chief derrick kuzak say they'll retire in april. their departures thin the ranks of possible replacements for 66-year-old c.e.o. alan mulally. ihs global insight's rebecca lindland thinks these retirements are part of a coordinated strategy for ford's future. >> ford is a very deliberate company and they don't do things lightly, so everything usually has a plan at ford. and i think they are trying to get some new fresh faces in place before alan's departure, so that investors are comfortable with the management team that is running ford when alan departs. >> tom: tom, lindland also thinks mulally is enjoying his job running ford so much that he's not likely to step down in the immediate future.
>> tom: -- a little bit of selling pressure on the new, not much, down about 1% well. go see small gains in the overall market. let's get to them with tonight's market focus. the major indices absorbed the news about the housing foreclosure settlement and headlines out of europe without much reaction. the morning saw some volatility before the market settling in with some small gains. still, it was enough to put the s&p 500 at its highest close since july. tech stocks led the way, up 1%. consumer staples and discretionary sectors gained a fraction each. internet metrics firm akamai helped spark the buying, rallying 10% after a strong quarterly earnings report and naming a new finance chief. tech stocks were generally higher after cisco systems reported better than expected quarterly results last night.
but not cisco-- shares dropped 2%. volume was extremely heavy, more than three times normal. still, apple shares hit new highs. reports a new ipad will be unveiled early next month encouraged buyers, and analysts were encouraged by continued strong iphone sales. a big tech buyout-- business software giant and serial acquirer oracle will spend almost $2 billion for taleo. that's a cloud computing human resources software firm. oracle shares were up a fraction. this is its second acquisition in three months. taleo stock shot up 17%, closing just shy of oracle's purchase price of $46 per share. pepsi is taking aim at coke, cutting jobs and using some of the savings to boost marketing. pepsi has been lagging coke, especially in the u.s. it will eliminate 8,700 jobs worldwide. earnings in the fourth quarter were better than expected.
but the pepsi c.e.o. called 2012 a "pit-stop year to refuel." shares certainly hit the brakes, falling almost 4% on heavy volume. the company rejected calls for it to split its beverage business from its frito-lay snack division. it's a different story at snack food maker diamond foods. the company will restate two years of financial results and replace its top two executives. shares took a nosedive, losing more than a third of their value. the company has been under increasing pressure for its accounting of payments to walnut farmers. the trouble also has put pressure on diamond food's plans to buy the pringles brand from p&g for close to $1.5 billion. an improving job market is good news for linkedin, the social networking site for professionals. earnings were better than anticipated, and showed a 30% jump from a year ago. shares came into tonight's earnings report off a fraction, but rebounded 4% in after-hours action. other new dot-com stocks saw heavy selling after their first earnings reports as public companies.
groupon shares tumbled 14% after reporting a surprise loss. trip advisor fell 15% after its first earnings report came in shy of estimates. its outlook was disappointing, too. and that's tonight's "market focus." >> tom: today's settlement over bad foreclosure documents, nor a deal to bail out greece change the coming slowdown in consumer spending, leading to a failing economy and a market crash. that's harry dent's forecast.
he is president of h.s. dent, an economic research firm. and he's author of the new book, "the great crash ahead." nice to see you again, harry. >> nice to be back, tom. >> tom: you're in the bruised up here despite forecasting a great cash of the money show. in january you were looking for a 30 to 50% move in the market before september. you've gotten good jobs numbers, manufacturing is coming back. are you wrong, or just early? >> well, you know, back when we talked to you last, and before that, we were looking for the fourth quarter and first quarter to be stronger than expected in economy. that happened. we were expecting inflation to stay near 4% and we were thinking well, u.s. treasury bonds will go up in yield 3 to 4%. and that will make it harder for the fed to stimulate with the qe3. what we have seen with the flight from europe, european bonds, u.s. has pushed our bonds down to ultra low yield which says the world is saying you know what qe3 is going to happen. >> you expect it to happen. you mean the federal reserve will launch a third round of treasury buying, bond buying in order to help goose the
economy further. >> we think with europe slowing, baby boomers are going from a platteau phase in spending since 2007 to a decline in the next two years and beyond, and everything else happening that our economy is going to slow again, qe2 is going to wear off b a year lag. but the fed request step in now and come in with a strong qe3 and thwart that again. >> so harry with that forecast if the federal reserve launches another stimulus effort is your forecast then for a fall in the autumn or in the fourth quarter or on into 2013. >> i think we're going to see stocks in the economy slow down in the second quarter, maybe third quarter at the latest. stocks are going start to go down again, like they have in the past. then fed is probably going to step in again very strong, stocks will come back, the economy on a lag because again it's about a one-year lag on the quote tative. >> that's happening this spring. >> we move in. >> so i think we get a minicrash in 2012. >> tom: minicrash is 20%, 25. >> like 20% or so which is enough to get out of the way but qe3 will wear off even
faster because the baby boomers are aging, they're going to spending less. there's nothing you can do to stop 92 million baby boomers from saving money instead of borrowing and spending. >> the great crash is how much, 50%. >> i think it's, i think market, i think is 502070%. >> it's going to be bigger than the last crash. >> and 2013. >> 2013 to 14, possibly 2012 starting but i think it's just going to start here and we're going see more down the road. >> is that by gold, by water, by -- >> no, not by gold. >> i want ones, shotgun shells and scotch bottles. >> is that right. >> because that's what people will trade for, not gold. >> this is a deflationary crisis. we got 42 trillion in private debt. way greater than the public debt at 15 trillion that will de lever in the next downturn and that will cause dollars to be destroyed, deflation in prices, and the u.s. dollar will go up and prices will go down. gold and inflation. >> usually an optimistic bunch at the money show. good luck getting out. >> harry dent with us in
orlando, the author of the great crash >> susie: here's what we're watching for tomorrow: we'll see the december trade numbers, and get a first look at february consumer sentiment from the university of michigan. also tomorrow, investech's james stack tells us why the u.s. economy won't slip into recession, a conversation with nbr's market monitor of 30 years. kodak is shutting down its digital camera business as it focuses on desktop printers. the bankrupt firm pioneered digital photography, launching the first digital camera back in 1975. kodak now says phasing out digital cameras, pocket video recorders, and digital picture frames will save more than $100 million a year. but dismantling the unit will result in a $30 million charge. >> tom: an american indian tribe is taking on some of the world's largest beer makers.
the oglala sioux tribe claims the brewers knowingly contribute to alcoholism on south dakota's pine ridge indian reservation. the tribe wants a half billion dollars from anheuser-busch inbev, miller, molson coors, and pabst brewing. it's also suing four beer stores in a nearby town. that town has about a dozen residents, but sells an estimated five million cans of beer a year, most to residents of the dry reservation. no comment yet from the brewers.
>> susie: teaching kids about money is more than just counting pennies. tonight's "kids & cash" explores what it means to teach financial values. here's james wood, author of "from ramen to riches." >> when teaching your kids about money, it's helpful to get them thinking about the role they want money to play in their lives. after all, money is embedded into every nook and cranny of our lives-- not just physically, but philosophically. why do some who are rich flaunt it, and others live such a low- key life that their neighbors have no idea of their wealth? why do some who aspire to the trappings of the rich subsume themselves in so much debt that, in reality, they are poor? we all have some kind of philosophy about money, whether it's consciously formed or not. our parents, our spiritual upbringing, our friends, and the media all influence that view. as your kids begin their independent financial lives, help them think about what money means to them, and how much they
need to enable the goals and dreams they have for their lives. get your kids to think about the money messages that resonate and those that don't. they'll be better equipped to make good decisions for themselves. i'm james wood. there are are so many different money market strategists, what is the mood, what are they saying. >> tom: general optimism, you guys optimistic about the market? mostly optimistic about the market. and the economy, certainly. they like what they are seeing in terms of the macroeconomic side of things but always a little bit protective, certainly, after what we've gone through in the last three years. >> susie: love to hear about optimism. thanks some of, tom. and that's "nightly business report" for thursday, february 9. i'm susie gharib. good night, everyone, and good night to you, too, tom. >> tom: good night, susie. i'm tom hudson. good night, everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: